Demand for FX-linked structured products slows
Appetite for FX-linked structured products has waned over the past two months as investors have sought to unwind existing products, particularly structures based on carry trades. Meanwhile today’s decision by the Bank of Japan to cut interest rates from 0.5% to 0.3% is unlikely to revitalise demand for carry trade structures.
“The rate cut could lead to renewed interest in the carry trade because of the widening of the rate differential with other currencies,” says one London-based head of FX structuring. “The problem with this is that as other currencies have cut their rates too, this differential is still not interesting enough to force people back to the carry trade.
Furthermore, the global economic crisis has led to a massive depreciation in emerging market currencies and carry unwinds, which means investors
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